A Taste of the Tropics

Some of the most popular beverage flavors these days
are exotic and tropical, and thanks to Fiji Water, the rapidly growing
bottled water brand imported from the Fiji islands, even plain water has
taken on a tropical twist. With 40 percent growth in 2006, and another 40
percent expected this year, Fiji Water is one of two hot brands from Roll
International, Los Angeles, which also owns the Pom Wonderful pomegranate
business. The brand first hit the U.S. market in 1996, and made its name in
high-end hotels, restaurants and spas. Lately Fiji has proved that its
premium positioning carries equally well into the retail world.

Fiji Water was developed by David Gilmour, owner of
the exclusive Wakaya Club resort in Fiji. The water was bottled for the
resort and Gilmour saw the potential to sell the brand to visitors through
other upscale venues once they were back home. It caught the attention of
celebrity chefs such as Charlie Trotter, Jean Georges Vongerichten and Nobu
Matsuhisa who featured Fiji Water in their restaurants. The brand developed
a reputation for eye-catching packaging and a unique, smooth taste. Roll
International acquired the water business in
late 2004, and says one of the first priorities was to show that the unique
properties of the brand were a direct result of its island source.

“What makes the brand and the business great is
multiple things,” says John Cochran, Fiji Water president and chief
operating officer. “The foundational part of it is really Fiji itself
and the brand. It is the most fabulous part of our story and what really
makes this product and this brand so sustainable for us going forward. I
think what we’ve tried to do over the past few years is build upon
what was a very good foundation that the original owners
established.”

More than a pretty face

Fiji Water’s striking packaging, with its square
bottle and three-dimensional labeling, served it well in upscale on-premise
locations, but expanding the brand to a wider audience meant educating
consumers about other attributes of the product as well.

“Prior to the acquisition, a lot of the
marketing was done surrounding our on-premise presence,” says Grace
Jeon, vice president of marketing and national accounts. “It was
touting the aesthetic value and the luxury or premium positioning of the
product.

“Where we’ve started to educate our
consumers is the truly unique selling proposition of the brand,” she
says. “First and foremost, a very small percentage of the folks knew
it was from Fiji. We knew it was really important to reinforce that because
once you reinforce that, you open all these other doors to talk about the
other sustaining values of the brand.”

Those values include the virgin ecosystem of Fiji, the
product’s flavor and health benefits. Fiji Water, the company says,
gets its unique, smooth flavor from silica that is present in the volcanic
rock of the underground aquifer in Fiji. Its plant is located in Viti Levu,
directly over the artesian aquifer from which the water is sourced. As the
water is filtered through the rock, it absorbs silica, which gives it a
softer quality than many waters. Fiji Water contains 85 mg. of silica per
liter.

“One comment that we continue to hear back from
consumers is that Fiji Water is smooth, it’s silky, it has this
really soft texture,” Jeon says.

While flavor is the primary benefit, the company
points to scientific studies touting the health benefits of silica as well.
Information on Fiji’s Web site includes details on silica’s
benefits to skin, hair, nails, bone density, and even reduced incidence of
Alzheimer’s disease.

“But we don’t lead with the scientific
proposition. We lead with everything else first,” Jeon says.

In addition to the Web site, the company has placed
information on its “foundational elements” on the back of its
bottles. A series of six labels communicate the attributes of the Fiji
islands, its unpolluted ecosystem, the artesian aquifer source, the
“untouched” value of the company’s plant operations, the
unique taste of the water and the benefits of silica.

Premium placement

One thing that has not changed as Fiji Water has taken
on a wider audience is its premium positioning, although the company admits
that the bottled water segment fights the pressure to “stack it high
and sell it cheap.” Cochran says sticking to its guns on pricing
actually has helped Fiji in some channels,
particularly in single-serve markets such as convenience stores. “The
penny profit is so good on this product,” he says. “Combined
with great velocity, it’s a huge win.”

“One of the biggest challenges we face on a
day-to-day basis is that there is only so much of that entire beverage area
[at retail] and everyone is so desperate to take price down and drive
volume and to get pallets on the floor,” he says. But he says the
higher margins and quick turn rates on Fiji often persuade retailers to
provide space for the product.

Jeon adds that the bottled water industry should heed
the experience of other beverage segments as reason for protecting its
price points. “If you’re not careful, it could follow suit of
carbonated soft drinks at some point, where you become a loss leader and
volume growth is higher than dollar growth,” she says. “You
want to always make sure you have that parity. That’s why we’re
always collaborating with our buyers when we try to position this product
and carve out space for this product.”

Fiji Water is present in most retail channels and also
has tried to maintain the on-premise focus that gave the brand its start.
The company says its retail business, which is serviced by distribution
partners such as independent soft drink bottlers, comprises about 80
percent of its sales. The remaining 20 percent can be found in on-premise
venues, which are handled by beer, wine and spirits wholesalers.

“I wouldn’t say that selling into that
channel is easy,” Cochran says. “We have a whole separate sales
force just focused on on-premise because of all the requirements and the
way they make decisions. But it’s a great part of our business and we
continue to build and invest in it.”

“It’s a great tribute to the founder and
former president for essentially building the brand awareness and equity
through an on-premise presence,” Jeon adds. “If we had just
shown up and gone to retailers, I don’t think it would be as
successful as it is today.”

She says the company continues to nurture the relationships it has developed with the epicurean
crowd. “We continue to give support to the folks who have taken us on
from the early days, which includes a host of chefs,” she says.
“They are so meticulous about every aspect of the presentation,
visual as well as for the palate, that they saw Fiji Water as the only
water worthy of being on that table.”

Several years ago, the company developed a decorative
silver sleeve to dress up restaurant tables and help owners put aside
reservations about serving water in plastic. On the retail side, Fiji Water
is available in half-liter, 1-liter and 1.5-liter bottles, as well as the
new Lil’Fiji 330-ml. size. The 1.5-liter bottle has surpassed the
1-liter size as the company’s best-selling SKU in the natural
products channel, and Lil’Fiji, which made its debut in Target stores
last year, is set for a national rollout during the first quarter of this
year.

“Believe it or not, there is a huge following of
kids and Fiji Water,” Jeon says. “[Lil’Fiji] becomes a
great little showcase item in lunch boxes and mothers feel great about
putting such a unique product in their lunch boxes as well. The small
[bottle] also lends itself to toting around in your purse or
bag.”

Fiji uses more substantial plastic packaging than some
bottled water products, and Cochran says it serves both a functional and
aesthetic purpose. “We use the highest grade plastic that you can buy
for bottles like this,” he says. “That is a big part of why the
taste doesn’t change and why the taste is so pure when you open the
bottle. That substantial feeling is not only good from a tactile
perspective, but it protects the product.”

He adds that the package’s see-through labeling
also was developed to be both visually dramatic and recycling friendly with
easy-to-wash adhesives.

Packaging additions aside, the company has no current
plans to join its competition in flavored, enhanced waters. Cochran says
the product’s “pure play” would not be served by the
addition of carbonation or other ingredients. “That’s not to
say that it will never happen, but right now it’s off-brand,”
he says. “We have so much opportunity, both domestically and
internationally, without having to consider either of those
options.”

A celebrated following

Outside of the United States, Fiji Water is available
in Canada, Mexico, the Caribbean, the United Kingdom, Russia, Hong Kong,
Singapore, Korea and Australia. The company’s international sales
team will double this year as it also plans to add Japan, South Africa,
Brazil, Taiwan and China. Stateside, it says its strongest markets are
Southern California and the New York metropolitan area, and it counts
Northern California, Florida, Texas and Chicago as rapidly emerging
markets.

From its base in Los Angeles, the company can observe
and nurture a special kind of marketing that resonates in markets all over
the country — Fiji Water’s celebrity fan base. Like any good
company in the proximity of Hollywood, Fiji uses a placement agency for
product guest appearances on TV shows such as “Desperate
Housewives.” Outside of that, Jeon says the company does not actively
seek celebrity endorsement, but is happy to have it nonetheless.
“It’s difficult to flip through Us magazine or People magazine and not see one or two celebrities toting
Fiji Water, totally on their own,” she says. “That provides an
aspirational factor to not only folks in L.A., but outside of this area. We
have consumers write us and say, ‘I saw this celebrity drinking it on
this show, and that’s why I drink it.”

One celebrity partnership in which the company was
actively involved was a collaboration with fashion designer Michael Kors.
Last summer Kors released a seasonal perfume called Fiji that contained a
splash of Fiji Water. “It provided us with great coverage and it also
was very unique because you don’t see a lot of water companies doing
something like that,” Jeon says. “We also were able to have a
presence in alternative channels that we normally wouldn’t be in,
like Sephora.”

While the added exposure through alternative retail
was a nice marketing boost, Fiji Water says it has more than enough
potential in existing channels for the time being. The brand already is the
leading bottled water in the natural food channel, and it sees the growing
focus on health and wellness as the key to future opportunities. “If
you accept the hypothesis that health and wellness will continue,”
says Cochran, “then as consumers become more enlightened and as the
natural products segment grows, it’s nothing but good news for us.”

Straight from the source

Fiji Water is bottled at a state-of-the-art plant that
sits above the water’s source in Viti
Levu, Fiji. The remote location is both its greatest asset and its biggest
challenge. The company points to Fiji’s virgin ecosystem in promoting
the purity of the water, but as President and Chief Executive Officer John
Cochran says, “Getting it from the plant, which is in the middle of
nowhere, in the middle of nowhere in Fiji, all the way to the
retailer’s shelf or a great hotel’s bedside table is a ton of
work.”

He says Roll International has put a great deal of
effort into fine-tuning execution and supply chain functions since it
acquired the brand in 2004. The 300,000-square-foot plant houses three
bottling lines. Its operations are vertically integrated with the company
creating its own bottle preforms and caps onsite. It generates its own
power to run the plant, and is building its own trucking business to
augment the current fleet that gets the water to port for shipping.

“We have invested heavily in the business in
terms of technology — everything from materials receiving to finished
goods output,” Cochran says. “It’s really now taken on
what most people in North America would view as world class
operations.”

When it comes to marketing, the company’s
“untouched” message has as much to do with its bottling
operations as the unpolluted environment of Fiji. “That has to do
with our bottling facility being literally on top of the aquifer,”
says Grace Jeon, vice president of marketing and national accounts.
“The way we bottle is within a sealed environment so the water, until
you unscrew the cap, is never exposed to the earth’s
environment.”

One thing it does not use for marketing purposes but
considers a big part of its business is the investment the company has made
in the community in Fiji. Cochran says Roll International owners Stewart
and Lynda Resnick are private about their philanthropic activities, but
“One of the biggest reasons the original owner had an interest in
selling this business to Stewart and Lynda was born out of the fact that he
wanted the business to be in the hands of someone who would not only
nurture the business but would continue to nurture and care for our role in
Fiji, which is environmental, financial and philanthropic.”

The company employs about 200 people in Fiji, provides
funding to build homes and schools as well as water projects for villages
in the area, and gives to projects promoting the health and wellness women and children.

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